The world is changing fast and finance is changing with it. Technological advances, demographic shifts, market upheaval and evolving customer expectations are impacting on business models and forcing organisations in every sector to rethink the way they operate. These developments are also challenging finance professionals to redefine their roles as business partners.
The pace of change that we see today is giving the finance function a clear mandate to go beyond its core accounting role and be much more influential within organisations. This mandate empowers finance to act as a guardian of the business model and an enabler of the organisation’s ability to create and preserve value in the digital age. It calls for finance to move from being a technical function that is largely focused on budgeting, planning and reporting, to being a commercial function that works with internal and external stakeholders to identify and explore new strategic opportunities.
The argument for finance having this mandate is based on two key principles. Firstly, the finance function has a unique end-to-end view of an organisation since every business activity has a financial consequence and management accounting already provides the framework for performance management. Secondly, the chief financial officer (CFO) is already a steward of the business, with the necessary knowledge and skills to co-pilot the organisation alongside the chief executive officer (CEO).
So how can finance functions take up this new mandate? Fundamentally, they need to apply the same skills that they use to perform their most basic activities – such as assessing finance risk, reconciling accounts or compiling management reports – to the much broader process of developing and deploying solutions alongside the rest of the organisation. This means drawing on their ability to assemble information, analyse for insights, influence decision makers, suggest impactful actions and demonstrate commercial acumen. In other words, while the finance mandate may be changing, it is still rooted in the function’s core accounting role.
Nevertheless, there is an inherent challenge for finance functions in shifting away from a world where core accounting is their central focus towards one where it’s more of a foundation for them to add value to the organisation instead. They will need to broaden their skillsets so they are recognised as much for their capacity to question constructively, guide strategic decision-making, partner with peers, manage risks and implement projects, as they are for their current prowess in providing trusted management information.
In fact, it is through fusing together four broad roles – reporting, questioning, developing solutions and deploying solutions – that finance functions will be able to step up and become the custodians of organisational value in future. The Association’s Global Management Accounting Principles reflect this fusion, and the changing role of the finance function, since they define management accounting as: “The sourcing, analysis, communication and use of decision-relevant financial and non-financial information to generate and preserve value for organisations”.
To achieve this fusion, the finance function will need to shift its emphasis from pure accounting to management and get its people to change their mindsets. Finance professionals have traditionally been known as technical experts, who speak in accounting jargon and have a keen interest in facts and figures. Going forward, however, they will need to be commercially minded problem-solvers who can handle ambiguity and speak the language of the business fluently. Accounting skills alone won’t be enough for the finance professionals of the future to succeed; they will also need the general commercial and social skills that will allow them to collaborate effectively with colleagues from a diverse range of disciplines, as well as external stakeholders.
There is no better time than now to start thinking about what your finance function needs to look like in future and how you can overcome the potential obstacles that stand in the way of transformation. For example, can you invest in technology to free up your people so that they can better support the business in broader roles? Do your people need to develop new skills, whether that’s business understanding, data analytics, interpersonal skills or a commercial, ever-learning mindset? How can you enhance the credibility of the finance function so that it is equally regarded for its commercial nous as it is for its accounting expertise? Where are the opportunities to widen the remit of finance to cover a broader range of management information, thereby generating new insights and business solutions? These are some of the questions that you need to answer.
Finance now has the mandate to define, enable, shape and tell the stories of how an organisation creates and preserves value. That is really, really exciting. Yet while some organisations understand this, and are innovators on the journey to the future, many others are lagging behind. Why let your organisation linger among the laggards when you could be among those that lead from the front?
For more details, you may download the report on changing role and mandate of finance https://www.cgma.org/resources/reports/changing-role-and-mandate-of-finance.html